For Czechs, euro adoption still a long way off

The European Commission’s Prague office hosted a conference on Friday on Slovenia’s experience in adopting the single European currency and how the Czech Republic could learn from it. Unlike Slovenia, which joined the eurozone in 2007, or Slovakia, which will join in 2009, the Czech Republic has no fixed target date for euro adoption and it will be many years before the euro arrives. So what can the Czechs learn from Ljubljana?

Andrej Bajuk, photo: CTK

Slovenia's Finance Minister Andrej Bajuk speaking to Czech officials and financial journalists on the Slovene experience of trading in their tolars. Despite a nasty brush with inflation, which Mr Bajuk said - contrary to popular belief - was largely unrelated to the euro, Slovenes seem to have adjusted well to the transition.

There’s a very different picture here in the Czech Republic. Prague has abandoned its target date of 2010 chiefly due to its high budget deficit, but the country’s euro entry co-ordinator Oldřich Dědek told the audience 2012 was still realistic. Sitting by his side was central bank governor Zdeněk Tůma, who earlier this month said that the Czechs could wait until 2019, when the country celebrates the 100th anniversary of the Czech, or rather Czechoslovak crown.

That dismayed those who want the Czechs to join sooner, rather than later. Among them is Tomáš Sedláček, Chief Economic Strategist for the Czech bank CSOB. I sat down with him at the ornate Café Savoy and asked him to weigh up the pros and cons of euro entry.

“The euro does have its costs. Like everything in today’s world, there are very areas where it’s clearly win-win and we have to very carefully weigh up the advantages and disadvantages. If you look around Europe, most European countries have come to a very clear conclusion that they do benefit or will benefit from euro adoption, and from the past history of the euro’s ten-year existence, we’ve seen a tremendous success that nobody – I underline nobody – expected.”

I'd just like to try a little experiment...(to waitress)...can you tell me, can we pay in euros here?

"Yeah you can pay in euros."

It's no problem?

"It's no problem."

Thank you very much...So proof there that the euro has become almost an inevitability, because we're sitting in a cafe in a city in a country which is not going to adopt the euro for many years, but it seems to be no problem to use them.

Photo: European Commission

"We talk of spontaneous euroisation. We have a lot of tourists that come here with euros, kind of expecting - listen, we're in Europe, why can't we use our currency? A lot of companies are also doing this, because this is a natural way to hedge against the strengthening of the koruna. Banks do this, so you see a lot of operations already actually being signed in euro terms."

The Czechs of course have to adopt the single European currency – it was one of the conditions for joining the EU in 2004. But the centre-right government says its strategy is to reform the country’s public finances first, and adopt the euro afterwards, to lessen the economic pain. Most analysts, therefore, don’t believe the Czech Republic will ditch the crown and adopt the euro until 2013-2014 at the earliest.